20.01.2021

Leading Japanese Firms Partner on Security Token Research

The group – the Security Token Research Consortium – includes security issuers, broker dealers and technology companies, such as NTT Docomo Inc. and KDDI Corp., the two largest telecommunications companies in Japan.

Mitsubishi UFJ Financial Group – Japan’s largest financial group and the fifth largest bank in the world by assets – is leading a 22-member research consortium to develop standards around security token management.

Securitize, a firm that enables the issuance and management digital securities, will be the only issuance platform provider for the consortium. The consortium will be the company’s first opportunity to tokenize fixed income assets, including bonds, where Securitize CEO Carlos Domingo told CoinDesk that tokenization has some of the best opportunities to create efficiencies.

The consortium is pursuing ways to develop, offer and onboard financial transactions services using blockchain, with a focus on automatic settlement for securities and funds. It plans to develop a dedicated security token blockchain called “Progmat” to provide a platform for managing securitized assets, including trust functions to minimize counterparty risk.

As a part of the research being conducted, the consortium will also apply for a Japanese patent regarding infrastructure and organizational structure for managing security tokens.

The consortium is being formed in the wake of Japanese legislators amending the country’s crypto laws. In March, Japan’s legislative body, the Diet, introduced a new bill to define security tokens as liquid securities, which would amend the existing Act on Settlement of Funds and the Financial Instruments and Exchange Act.

“It has to go through loopholes of intermediaries–the issuer, the paying agent, the clearing house–to be able to actually pay back to the investor whatever portion of the note they acquire,” Domingo said about the current way in which fixed income assets are issued and bought. “This process is bound to have errors.”

Earlier this year, Securitize launched its digital security offering service and a referral network to help companies issue and manage digital securities and registered with the SEC as a transfer agent to act as the official record keeper of securities issued on blockchain. The company raised a $14 million funding round backed by MUFG Innovation Partners, Nomura Holdings and Santander InnoVentures.

MUFG has several other blockchain projects in its innovation pipeline.

The Japanese financial services giant is developing a blockchain payments network with fintech company Alkami Technologies to be launched in the first half of 2020. Its blockchain trade platform with NTT Data aimed at fostering trade between Singapore and Japan is being tested now, while the company is also participating in a blockchain proof-of-concept to streamline know-your-customer processes with HSBC Singapore, OCBC Bank and the Info-communications Media Development Authority, a Singapore regulator.

Lawyers Ramp Up Pressure to Exhume Quadriga CEO’s Body

Lawyers representing the former users of the QuadrigaCX platform are doubling down on a formal request to exhume the exchange’s founder’s body.

“Today, Representative Counsel issued a letter to the Honorable Bill Blair, Canadian Minister of Public Safety and Emergency Preparedness, requesting an update on whether the RCMP will conduct an exhumation and post­mortem autopsy on the alleged body of Gerald Cotten prior to Spring 2020,” the letter reads.

The document notes users can contact the minister directly via email “if they have further questions about the RCMP’s management of this file,” while also suggesting they can contact their Members of Parliament for possible answers.

An email sent to Blair was not immediately returned.

Tuesday’s letter follows an update from Ernst & Young (EY), the bankruptcy trustee for Quadriga. The company, which was appointed by the Nova Scotia Supreme Court last year to consolidate Quadriga’s crypto holdings, said Monday it was requesting a court approve nearly $640,000 CAD ($484,000 USD) in expenses for cooperating with multiple federal agencies.

According to the report, EY spent $188,939 CAD between June 24, 2019, and Dec. 31, 2019, “in connection with the Law Enforcement Activities.” In addition, Stikeman Elliott and Lenczner Slaght, law firms representing EY, charged $133,618 CAD and $314,599 CAD, respectively, over the same time period.

According to EY, much of this billing comes from analyzing 750,000 documents the company compiled into an “EDiscovery Database,” which was then used to determine which documents met production demands from the various law enforcement agencies involved.

“During the process, the Trustee made various efforts to minimize costs and to streamline wherever possible the accumulation, review and production of documents,” the report said. “This included utilizing the services of contract lawyers specialized in privilege review and available at a significantly lower billing rate than other professionals managing the overall Law Enforcement Activities.”

However, the sheer volume of documents meant that “significant” effort on EY and its counsel’s part were still required.

A nearly 80-page breakdown details how the expenses were accrued. The report did not provide any information on how many claims were filed by creditors or how much each creditor might expect to receive.

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